Answer:
A
Explanation:
In this question, we are asked to select the option that correctly gives the book value of the equipment at the end of the second year.
Firstly, we identify the cost of property, which is the cost at which the MARCS were bought. This is $216,000
The rates of the MARCS for the first, second and third years are given by 0.2, 0.32 and 0.192 respectively.
We proceed to calculate the depreciation for the first and second years.
For the first year, depreciation = Rate * Cost of Property = 0.2 * 216,000 = $43,200
For the second year, depreciation = Cost of property * rate = 216,000 * 0.32 = $69,120
We now add the depreciations for the two years:
Total depreciation for years 1 and 2 is : $69,120 + $43,200 = $112,320
At the end of year 2, the book value of the property will be $216,000 - $112,320 = $103,680
Option A corresponds to this value
Check:
216,000(1-0.2-0.32) = 216000(0.48) = $103,680
